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Disposal by Nashua Mobile (Pty) Ltd of its MTN & Vodacom Subscriber Bases & cautionary ann relating to its Cell C
REUNERT LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1913/004355/06
ISIN: ZAE000057428
Share code: RLO
(“Reunert” or “the Company”)
DISPOSAL BY NASHUA MOBILE (PTY) LTD OF ITS MTN AND VODACOM SUBSCRIBER
BASES AND CAUTIONARY ANNOUNCEMENT RELATING TO ITS CELL C SUBSCRIBER
BASE
1 THE TRANSACTION
1.1 Shareholders are hereby advised that Nashua Mobile Proprietary Limited (“Nashua
Mobile”), a wholly-owned subsidiary of Reunert, has entered into separate and
distinct sale agreements (“Sale Agreements”) with each of Mobile Telephone
Networks Proprietary Limited (“MTN”) and Vodacom Proprietary Limited
(“Vodacom”) (collectively the “Purchasers”), on 11 April 2014, in terms of which,
inter alia, Nashua Mobile will dispose of its MTN and Vodacom subscriber bases to
MTN (“the MTN Transaction”) and Vodacom (“the Vodacom Transaction”)
respectively, on the terms and conditions set out below (collectively the
“Transaction”).
1.2 Both Vodacom and MTN are South African mobile network operators. Vodacom is a
subsidiary of Vodacom Group Limited and MTN of MTN Group Limited, both holding
companies being listed on the JSE Limited.
2 BUSINESS OF NASHUA MOBILE
Nashua Mobile’s business is that of a mobile cellular service provider for South African
mobile network operators, including MTN, Vodacom and Cell C Proprietary Limited
(“Cell C”) in terms of service provider agreements entered into with each of these mobile
network operators respectively.
3 RATIONALE FOR THE TRANSACTION
Following the expiry of the service provider agreement between Nashua Mobile and
Vodacom and the expiry of the incentive agreement between MTN and Nashua Mobile
under the MTN service provider agreement, the boards of Reunert and Nashua Mobile
were required to consider the long-term prospects for Nashua Mobile. After careful
consideration, the boards concluded that it is unlikely that this business would generate
acceptable returns. Accordingly, agreements with the Purchasers for the MTN and
Vodacom subscriber bases have been concluded.
4 THE EFFECTIVE DATE OF THE TRANSACTION
MTN
4.1 In terms of the MTN sale agreement, the MTN subscriber base will transfer to MTN on a
date to be selected by MTN, which date must fall within the second calendar month after
the fulfilment or waiver of the last of the conditions precedent to the MTN Transaction
(“MTN Take-On Date”).
Vodacom
4.2 In terms of the Vodacom sale agreement, the Vodacom subscriber base will transfer to
Vodacom on the date upon which Nashua Mobile successfully migrates its Vodacom
subscribers to Vodacom, which migration will commence on the Friday in the third week of
the second calendar month after the fulfilment or waiver of the last of the conditions
precedent to the Vodacom Transaction until successful migration has taken place
(“Vodacom Successful Migration Date”).
5 DISPOSAL CONSIDERATION
5.1 The combined gross consideration to be received by Nashua Mobile from the Purchasers
for the disposal of the respective MTN and Vodacom subscriber bases is approximately
R2,26 billion plus VAT.
5.2 The consideration is subject to a formula-based adjustment in the event that the revenue
associated with the subscriber bases differs from that attributed to it by the Purchasers.
Based on the current Nashua Mobile subscriber base performance it is unlikely that the
gross consideration will be adjusted by more than 10%.
5.3 The MTN Disposal Consideration will be payable by MTN to Nashua Mobile as follows:
(1) 90% of the MTN Disposal Consideration will be payable on the MTN Take-On Date;
and
(2) the balance of the MTN Disposal Consideration will be payable within 10 business
days of the MTN Take-On Date.
5.4 The Vodacom Disposal Consideration will be payable by Vodacom to Nashua Mobile as
follows:
(1) 85% of the Vodacom Disposal Consideration within 5 business days of the
Vodacom Successful Migration Date; and
(2) the balance of the Vodacom Disposal Consideration on the later of 5 days after
confirmation of Vodacom’s successful bill run in respect of the Vodacom subscriber
base or Nashua Mobile meeting Vodacom’s conditions for final payment.
6 CONDITIONS PRECEDENT
The MTN Transaction
6.1 The MTN Transaction is subject to the fulfilment or waiver of the following conditions
precedent:
(1) the unconditional approval of the Competition Authorities having been granted in
terms of the Competition Act, 1998 (“Competition Act”) or, if such approval is subject
to any conditions, on conditions acceptable to Nashua Mobile, insofar as the
conditions may affect Nashua Mobile, and acceptable to MTN, insofar as the
conditions may affect MTN;
(2) the execution of a sale agreement between Nashua Mobile and a third party for the
sale of the Nashua Mobile Cell C subscriber base; and
(3) the execution of a sale agreement between Nashua Mobile and Vodacom for the
sale of the Nashua Mobile Vodacom subscriber base.
The Vodacom Transaction
6.2 The Vodacom Transaction is subject to the fulfilment or waiver of the following conditions
precedent:
(1) the unconditional approval of the Competition Authorities having been granted in
terms of the Competition Act or, if such approval is subject to any conditions, on
conditions acceptable to the respective boards of Nashua Mobile and Vodacom;
(2) the execution of a sale agreement between Nashua Mobile and MTN for the sale of
the Nashua Mobile MTN subscriber base;
(3) the execution of a sale agreement between Nashua Mobile and a third party for the
sale of Nashua Mobile Cell C subscriber base; and
(4) Nashua Mobile and Vodacom agreeing on technical specifications for delivery.
6.3 Both Sale Agreements contain conditions precedent of a technical or administrative nature,
such as steps to be taken regarding existing insurance and financing arrangements with
subscribers and execution of binding undertakings regarding continuation of certain
functions, such as document retention.
7 APPLICATION OF THE DISPOSAL PROCEEDS
The sale proceeds will be applied as follows:
7.1 to settle liabilities of Nashua Mobile;
7.2 thereafter, to support the growth strategy of Reunert; and
7.3 thereafter, for the payment of dividends and/or the repurchase of Reunert shares.
8 PRO FORMA FINANCIAL EFFECTS OF THE TRANSACTION ON REUNERT
The unaudited pro forma financial effects of the Transaction on Reunert are presented for
illustrative purposes only and due to their nature may not fairly present Reunert’s financial
position, changes in equity, results of operations or cash flows.
Set out below are the unaudited pro forma financial effects of the Transaction, based on
Reunert’s published, audited results for the year ended 30 September 2013. The unaudited
pro forma financial effects have been prepared in accordance with the JSE Listings
Requirements, the Guide on Pro Forma Financial Information issued by SAICA and the
measurement and recognition requirements of International Financial Reporting Standards
(IFRS). Accounting policies used to prepare the unaudited pro forma financial effects are
consistent with those applied in the preparation of the audited results for the year ended
30 September 2013.
The directors of Reunert are responsible for the preparation of the unaudited pro forma
financial effects.
Audited before the Pro forma after Change Notes
Transaction the Transaction (%)
(cents per share) (cents per share)
Basic earnings per share 587,8 1 480,83 151,9 1&2
Diluted basic earnings 582,3 1 466,45 151,8 1&2
per share
Headline earnings per 583,2 455,0 -22,0 1, 2 & 3
share
Diluted headline 577,7 450,6 -22,0 1, 2 & 3
earnings per share
Normalised headline 569,1 440,8 -22,5 1, 2 & 3
earnings per share
Net asset value per 2 980,0 4 233,3 42,1 1&4
share
Tangible net asset value 2 484,3 3 683,2 48,3 1&4
Notes and assumptions:
1. The financial information in the “after the Transaction” column has been calculated
using the disposal proceeds (as disclosed in this announcement) and estimated costs of
the disposal of the subscriber bases to the Purchasers.
2. The financial information in the “after the Transaction” column does not take into
account the application of the net disposal proceeds for any investment activities.
3. Adjustments to earnings per share (“EPS”) and headline and normalised EPS have
been made on the assumption that the disposal was effective on 30 September 2013.
Therefore no interest has been assumed on the investment of the proceeds. Company
tax at the statutory rate of 28,00% has been applied for deductible expenses and
Capital Gains Taxation of 18,67% has been applied to the proceeds on disposal of the
subscriber bases.
4. Adjustments to net asset value (“NAV”) and tangible net asset value (“TNAV”) per share
have been made on the assumption that the disposal was effective on 30 September
2013.
9 CATEGORISATION OF THE TRANSACTION
The Transaction is classified as a Category 2 transaction in terms of Section 9 of the JSE
Listings Requirements and does not require shareholder approval.
10 FURTHER ANNOUNCEMENT
Shareholders will be notified once the last of the conditions precedent to the Transaction
has been fulfilled or waived, as the case may be.
11 CAUTIONARY ANNOUNCEMENT
Nashua Mobile is pursuing various alternatives for the disposal by Nashua Mobile of its
Cell C subscriber base. Reunert shareholders are therefore advised to exercise caution
when dealing in their Reunert shares until a further announcement is made.
By order of the board of the Company
Woodmead, Sandton
14 April 2014
Legal Advisor
Norton Rose Fulbright South Africa
Merchant Bank and Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
Date: 14/04/2014 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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